Rightsizing Brazil’s Public-Sector Wage Bill

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Summary:

Brazil’s public-sector wage bill is comparatively high. It grows inertially and competes
with other spending. Rightsizing the wage bill could stimulate administrative efficiency
and bring more equity into a system where public employees earn more than private in
comparable professions. Most importantly, however, a reform is necessary to comply with
the Federal government expenditure ceiling and the subnational fiscal responsibility rules.
A reform should thus encompass all government levels, and all careers, and should aim to
achieve a real decrease in salaries and lower employment. In the medium term, a review
of the compensation structure should rationalize the multitude if wage grids, merge
allowances into the base wage, and align public sector compensation to private wages in
low-skilled professions.